It is really important for investors to spend their money wisely. A slight mistake can destroy their whole investment. There are several mistakes that are common among new investors due to lack of experience. Experience teaches important things to investors. But most of businessmen, especially small investors, can’t afford to learn through experience. It is necessary for them to avoid these mistakes that are usually carried out by startups. It is because they lack additional funds and these mistakes can result in complete failure of their venture.
Following are few important investment mistakes that are made by new investors and avoiding these mistakes in the beginning is critical for them.
- No investment plan
The primary and most important mistake of new investors is start investing your precious money without any plan. Investing without any plan is like gambling where there is too much speculation and unrealistic hopes. An investor must be aware about the type of business where he/she is going to invest, chances of growth of this business and the time it will take to reach your goal. Your investment plan should be comprehensive that must include all important aspects related to your desired results.
- No timeframe
Another important mistake that new investors make is investing in a business without specifying the time it will require to reach target. It is better to evaluate performance of your investment by dividing your goal in different phases. By this type of time management, it will be easier for investors to track record performance of their investment.
It will allow them to invest more in case of getting benefit on continuous level. On the other side, they can stop investing a niche and start thinking about new type of investment plan in case they fail to achieve goals in time.
- Not analyzing risks
There is no investment in the world that is completely free from all types of risks. But that doesn’t mean one should not care about the severity of risk one may face in his future investment. It is better to balance the profits you can expect from an investment with the type of risks you may face in the way.
If there are chances that you may get huge profit but the risk is also high, then it’s better to take safer option. In these circumstances, it is more suitable to invest in business that provides less profit but with manageable risk. But even if you have enough money to tolerate initial loss for huge profit, even then it is better to invest not too much on this risky business.
- Not considering tax and fees
Another important aspect that is missed by new investors is the tax and fees applicable on the type of investment they choose. On several occasions, the tax and various fees increase with increase in profit. In this case, even getting higher profits may not prove very lucrative.
- Not researching market
Another important mistake made by beginners is investing without complete research on a particular market. Investing in a niche while ignoring its market can result in huge loss. There are different demands for a consultancy in Dubai as compared to real estate business in Cairo. Not only current market situation, but also future prospects of market must also be evaluated in order to keep your investment safe for long term.
Putting all your eggs in one basket is never a good policy for investors. Even if your single investment is doing well and there is no risk seems ahead, no one can guarantee change of situation in near or far future. Therefore, it is safe to diversify your investment by choosing multiple options. It will save you during sudden mishaps and keeps your profit growing even if your main investment faces trouble.
Author Bio: Mona has experience of more than 6 years while working as a content writer and consultant at Riz & Mona Consultancy (a Dubai-based consultancy firm). Her interests include writing for business niches including investment, small businesses, startups, offshore business and others.